TaxTMI 
TaxTMI 
2026 (2) TMI 305
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....ection 148 dated 28.03.2013, invoking the provisions of section 147 of the Act. The reassessment proceedings were initiated on the basis of information received from the Investigation Wing relating to alleged bogus share transactions, purportedly linked to entities controlled by Shri Mukesh Choksi. After completion of reassessment proceedings, the Assessing Officer passed an order under section 143(3) read with section 147, determining the total income of the assessee at Rs. 7,09,828/-, as against the returned income of Rs. 62,780/-. The addition primarily related to an amount of Rs. 6,36,866/-, treated as unexplained/bogus share transactions. 3. Aggrieved by the reassessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals)-1, Thane. Since identical issues arising out of alleged bogus share transactions were involved for A.Ys. 2008-09, 2009-10 and 2010-11, the CIT(A)-1, Thane disposed of all the three appeals by a common order dated 25.05.2018 in ITA Nos. 408, 409 and 410/2014-15. 4. In so far as Assessment Year 2009-10 is concerned, the CIT(A) recorded that the assessee had disclosed in the return of income: * Long Term Capital....
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....s LTCG had been sustained by the CIT(A), the assessee had concealed particulars of income for the year under consideration. 8. Aggrieved by the levy of penalty, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC). The CIT(A), NFAC, by order dated 24.09.2025, dismissed the appeal and confirmed the penalty of Rs. 1,29,410/-, holding that the assessee had failed to substantiate her explanation and that the sustained addition justified levy of penalty under section 271(1)(c). 9. Against the aforesaid order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. "On the facts and in the circumstances of the case, the CIT(A) erred in law and on facts in confirming the penalty u/s 271(1)(c) without appreciating that the penalty was levied solely on account of the addition and not based on any independent finding of concealment or furnishing inaccurate particulars. 2. The entire assessment and penalty proceedings are vitiated as the AO failed to grant cross-examination of untested statement of Shri Mukesh Choksi, the only person whose alleged statement was used to....
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....m Capital Gain (LTCG) for A.Y. 2009-10. Similarly, the amount of Rs. 72,596/- was disclosed as Short Term Capital Gain and offered to tax. The AR submitted that in the reassessment order, the Assessing Officer had treated Rs. 6,36,866/- as unexplained investment in shares under section 69. However, this entire addition was deleted by the CIT(A)-1, Thane in the common appellate order dated 25.05.2018.Thus, the very basis on which penalty proceedings were originally initiated ceased to exist, and penalty could not have been sustained on an altogether different amount which arose subsequently due to appellate proceedings. 11. The AR submitted that the common CIT(A) order clearly records that the assessee agreed to sustain the addition of Rs. 6,47,054/- only to buy peace of mind. Such an admission, made during appellate proceedings to avoid protracted litigation, cannot be equated with concealment of income. It was argued that an admission made for settlement or to avoid further litigation does not ipso facto establish mens rea or deliberate concealment, particularly when the income was already disclosed in the return. 12. The learned Departmental Representative strongly supporte....
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.... order proceeds mechanically on the basis of the order giving effect dated 19.06.2018, which is purely a consequential order and cannot substitute the statutory requirement of recording satisfaction under section 271(1)(c). 21. Penalty proceedings being quasi-criminal in nature, the recording of clear and specific satisfaction is a sine qua non. In the absence of such satisfaction, the levy of penalty cannot be sustained. 22. Another significant inconsistency which goes to the root of the matter is that the amount of Rs. 6,47,054/- was admittedly disclosed by the assessee in the return of income as Long Term Capital Gain. Similarly, the amount of Rs. 72,596/- was disclosed as Short Term Capital Gain. Thus, this is not a case of non-disclosure of income, nor a case where particulars were withheld from the Department. The dispute relates only to the head under which the disclosed income was to be taxed and the rate at which it was liable to tax. 23. It is a settled legal position that where all primary facts are disclosed in the return of income, and the addition arises due to a different legal characterisation of such disclosed income, penalty under section 271(1)(c) is not....